ESG standards are a set of guidelines that companies use to ensure they are operating in a socially responsible, environmentally friendly, and ethically accountable manner. The commercial real estate industry is under increasing pressure to focus on ESG, with investors and clients expecting real estate owners and operators to demonstrate their sustainability and mitigate ESG risks in their portfolios. ESG considerations are becoming more important for businesses in the real estate sector as they can help to reduce costs, generate revenue, and protect companies from potential liabilities.
The Importance of Governance
ESG is an acronym for Environmental, Social and Governance. It is a framework for creating a healthier and more sustainable environment for businesses and communities. In the real estate industry, the emphasis on the “G” in ESG requires dedicated focus and leadership.
Governance is a set of systems, processes, and tools that are implemented in order to ensure that the organization is meeting its ESG goals. These tools and the team in charge of them are responsible for enacting the policies, procedures, protocols, that will ensure a CRE organization maintains ESG compliance. There are a number of factors that need to be looked at to ensure all governance goals are met.
Establishing Change Management Protocols
Change management is a strategy for dealing with organizational change. The goal of change management is to help people adapt to new goals, processes, or technologies. Change management is essential for the successful governance of ESG initiatives. Change management helps ensure that all stakeholders are involved and bought into the process, that expectations are clear, and that the transition to the new governance structure is smooth and effective.
Alignment of Data Strategy and Cybersecurity
Establishing an effective alignment of data strategy and cybersecurity is essential in today’s digital world. Companies face new challenges in meeting regulatory reporting requirements and investor demands for ESG data. Meeting these new requirements often means updated end-to-end data governance and processing to ensure that ESG data is captured, managed and distributed across the business in a reliable manner. To add to the complexity of this process is doing that while updating and maintaining new cybersecurity processes. Having a comprehensive cybersecurity framework in place that focuses on the management of potential risks, compliance with regulations, and the ability to respond to incidents is critical in maintaining ESG compliance.
Technological Advancements Drive ESG
Technology can help companies achieve ESG standards in a number of ways. It can provide data-driven insights into operations, allowing companies to track performance and identify areas of improvement. It can also help with compliance by providing real-time monitoring of ESG regulations and reporting. Some of the technology currently available focus on energy management, renewable energy use, smart building and building information modelling.
Building Information Modelling (BIM)
Technological advances, such as Building Information Modelling (BIM), are increasingly becoming more prevalent in the commercial real estate industry. BIM is a 3D modelling process that enables real estate developers, investors, and managers to create a virtual model of their building. This virtual model can be used to evaluate potential design and construction decisions, and to better understand the impacts of those decisions.
Smart Building Technology
Smart building technology can help commercial real estate owners reduce energy consumption, improve air quality, and increase safety and security. Almost all “smart” devices now connect to the Internet of Things or IoT. This is a great benefit for automating data collection, but emphasizes the importance of cyber security and data governance in the governance process.
Use of Renewable Energy
The commercial real estate industry has made significant strides towards incorporating renewable energy into their operations. Technological advancements in energy storage and renewable energy have made it possible for commercial real estate entities to have access to sustainable, reliable sources of energy.
Energy Management
Energy management systems are an important tool for commercial real estate owners looking to meet their ESG goals. These systems can help owners monitor energy usage, identify areas of overuse or inefficiency, and set goals for improvement.
ESG Opportunities for CRE
By implementing ESG practices, commercial real estate owners and managers can make their buildings more energy efficient, reduce their carbon footprint, improve indoor air quality, and more.
The government and other stakeholders have an important role in promoting ESG in the commercial real estate industry. The government can offer incentives to businesses that meet ESG criteria, such as tax credits or grants.
Contact Hartman to Learn More About ESG and Commercial Real Estate
ESG is playing an increasingly important role in the commercial real estate industry. As commercial real estate investors become more aware of the need to be proactive in addressing environmental and social issues, ESG-focused investment strategies are becoming more popular. This trend will continue as ESG-related performance metrics become more widely accepted and integrated into the industry. Contact Hartman Executive Advisors today to learn how we can help you achieve ESG compliance.